U.S. Stocks May See Initial Strength On Continued Stimulus Optimism

After ending the previous session mostly higher, stocks may see further upside in early trading on Thursday. The major index futures are currently pointing to a higher open for the markets, with the Dow futures up by 214 points.

The markets may benefit from continued optimism about a new stimulus bill after House Democrats delayed a vote on their coronavirus relief package.

The delayed vote on the $2.2 trillion Democratic bill, which Republican leaders have flatly rejected, is intended to give lawmakers more time to reach an agreement.

House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin failed to reach an agreement on a new bill during a meeting on Wednesday but noted talks will continue.

In a statement, Pelosi said she and Mnuchin found “areas where we are seeking further clarification” during the “extensive conversation,” adding, “Our conversations will continue.”

Buying interest may also be generated in reaction to a report from the Labor Department showing a bigger than expected drop in first-time claims for U.S. unemployment benefits in the week ended September 26th.

The report said initial jobless claims fell to 837,000, a decrease of 36,000 from the previous week’s revised level of 873,000.

Economists had expected jobless claims to dip to 850,000 from the 870,000 originally reported for the previous week.

Meanwhile, the Commerce Department released a separate report showing a steep drop in U.S. personal income in the month of August, with the sharp pullback reflecting a decrease in unemployment insurance benefits.

The Commerce Department said personal income tumbled by 2.7 percent in August after rising by an upwardly revised 0.5 percent in July.

Economists had expected personal income to slump by 2.5 percent compared to the 0.4 percent increase originally reported for the previous month.

At the same time, the report said personal spending climbed by 1.0 percent in August after jumping by a downwardly revised 1.5 percent in July.

Personal spending was expected to increase by 0.8 percent compared to the 1.9 percent spike originally reported for the previous month.

Shortly after the start of trading, the Institute for Supply Management is scheduled to release its report on manufacturing activity in the month of September.

The ISM’s purchasing managers index is expected to inch up to 56.3 in September from 56.0 in August, with a reading above 50 indicating growth in the manufacturing sector.

The Commerce Department is also due to release its report on construction spending in the month of August. Construction spending is expected to climb by 0.8 percent.

Stocks moved sharply higher in morning trading on Wednesday before seeing considerable volatility late in the session. The major averages pulled back well off their highs but moved back to the upside going into the close of trading.

The major averages all finished the day firmly in positive territory. The Dow jumped 329.04 points or 1.2 percent to 27,781.70, the Nasdaq climbed 82.26 points or 0.7 percent to 11,167.51 and the S&P 500 advanced 27.53 points or 0.8 percent to 3,363.00.

In overseas trading, the Tokyo Stock Exchange halted trading on Thursday due to a technical issue, while markets in China, Hong Kong, South Korea and Taiwan were closed for holidays. Australia’s S&P/ASX 200 Index jumped by 1 percent.

Meanwhile, the major European markets have turned mixed on the day. While the German DAX Index has edged down by 0.1 percent, the U.K.’s FTSE 100 Index is up by 0.2 percent and the French CAC 40 Index is up by 0.6 percent.

In commodities trading, crude oil futures are falling $0.62 to $39.60 a barrel after climbing $0.93 to $40.22 a barrel on Wednesday. Meanwhile, after sliding $7.70 to $1,895.50 an ounce in the previous session, gold futures are jumping $16.50 to $1,912 an ounce.

On the currency front, the U.S. dollar is trading at 105.57 yen versus the 105.48 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.1761 compared to yesterday’s $1.1721.

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